LEE ENTERPRISES, INCORPORATED
215 N. Main Street
Davenport, Iowa 52801-1924
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD January 23, 2002
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Lee Enterprises, Incorporated, a
Delaware corporation (the "Company"), will be held at the Radisson Quad City
Plaza Hotel & Conference Center, 111 E. 2nd Street, Davenport, Iowa, on January
23, 2002, at 9:00 a.m., for the following purposes:
(1) To elect two directors for terms of three years; and
(2) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed December 3, 2001 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting.
It is important that your shares be represented whether or not you plan
to attend the Annual Meeting. You may vote by marking, signing and dating the
enclosed proxy card and returning it in the postage paid envelope. Stockholders
may also vote by telephone or via the Internet. If you attend the meeting, you
may withdraw your proxy at that time and vote your shares in person.
/s/ C. D. Waterman III
- -----------------------------
C. D. Waterman III, Secretary
Davenport, Iowa
December 27, 2001
LEE ENTERPRISES, INCORPORATED
2002 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of the Company to be voted at the Annual
Meeting of Stockholders to be held at the Radisson Quad City Plaza Hotel &
Conference Center, 111 East 2nd Street, Davenport, Iowa on Wednesday, January
23, 2002, at 9:00 a.m., for the purposes set forth in the Notice of Annual
Meeting of Stockholders.
The principal executive offices of the Company are located at 215 N.
Main Street, Davenport, Iowa 52801-1924. This Proxy Statement and the enclosed
form of proxy are being mailed to stockholders on or about December 27, 2001,
together with a copy of the Company's Annual Report for the fiscal year ended
September 30, 2001.
PROXIES
Your vote is very important. For this reason, the Board of Directors is
requesting that you use the enclosed proxy card to vote your shares. If the
accompanying proxy is executed, the shares represented by the proxy will be
voted as specified below. You may also vote your shares by delivering your proxy
by telephone or via the Internet.
If a broker, bank or other nominee holds your Common Stock, you will
receive instructions from them that you must follow in order to have your shares
voted. If you hold certificate(s) in your own name as a holder of record, you
may vote your Common Stock or Class B Common Stock by signing, dating and
mailing the proxy card in the postage paid envelope provided. Alternatively, you
may vote your shares in person at the Annual Meeting.
You may revoke the proxy before the Annual Meeting, whether delivered
by telephone, Internet or through the mail, by using the telephone voting
procedures, the Internet voting procedures or by mailing a signed instrument
revoking the proxy to: C. D. Waterman III, Corporate Secretary, Lee Enterprises,
Incorporated, 215 N. Main St., Davenport, IA 52801-1924. To be effective, a
mailed revocation must be received by the Secretary on or before January 22,
2002. A stockholder may also attend the Annual Meeting in person, withdraw the
proxy and vote in person.
VOTING PROCEDURES
Stockholders of record at the close of business on December 3, 2001
will be entitled to vote at the Annual Meeting or any adjournment thereof. As of
November 30, 2001, there were 33,920,305 shares of Common Stock and 10,210,918
shares of Class B Common Stock outstanding. Each share of Common Stock is
entitled to one vote at the Annual Meeting; each share of Class B Common Stock
is entitled to ten votes at the meeting.
The presence, in person or by proxy, of a majority of the voting power
of Common Stock and Class B Common Stock of the Company issued and outstanding
and entitled to vote is necessary to constitute a quorum at the Annual Meeting.
The affirmative vote of the holders of a plurality of the voting power of Common
Stock and Class B Common Stock represented in person or by proxy at the Annual
Meeting is required to elect directors, and the affirmative vote of the holders
of a majority of the voting power of Common Stock and Class B Common Stock
represented at the Annual Meeting is required to act on any other matter
properly brought before the meeting.
Abstentions from voting will be included for purposes of determining
whether the requisite number of affirmative votes are received on any matters
other than the election of directors submitted to the stockholders for vote and,
accordingly, will have the same effect as a vote against such matters. If a
broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will be
considered as present and entitled to vote, but will have no effect on the vote,
with respect to that matter.
In voting by proxy with regard to the election of directors,
stockholders may vote in favor of all nominees, withhold their votes as to all
nominees, or withhold their votes as to specific nominees. Stockholders should
specify their choices on the accompanying proxy card or by using the telephone
or Internet voting procedures. All properly executed proxies delivered by
stockholders to the Company and not revoked will be voted at the Annual Meeting
in accordance with the directions given. If no specific instructions are given
on a proxy card with regard to the matters to be voted upon, the shares
represented by a signed proxy card will be voted "FOR" the election of all
directors as more fully set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters according to their judgment.
PROPOSAL ONE - ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting to hold office
for three-year terms expiring at the Annual Meeting of Stockholders in 2005.
Each of the individuals named below is a nominee of the Nominating
Committee of the Board of Directors. Mr. Crain and Mr. Moloney are presently
directors whose current terms expire January 23, 2002. Current directors Richard
D. Gottlieb, J. P Guerin and Phyllis Sewell are retiring at the Annual Meeting
and will not stand for re-election. The Board of Directors does not currently
plan to fill the vacancies and, effective as of the Annual Meeting date, the
number of directors will be reduced to eight.
Proxies will be voted for the election of these nominees unless the
stockholder giving the proxy withholds such authority. If as a result of
circumstances not now known any of such nominees shall be unable to serve as a
director, proxies will be voted for the election of such other person as the
Board of Directors may select. Information about the nominees and directors
continuing in office is set forth below:
Nominees For Election As Directors
Director
Nominee Age Proposed Term Since
- --------------------------------------------------------------------------------
Rance E. Crain (1) ................. 63 3 years (2005) 1990
Herbert W. Moloney III ............. 50 3 years (2005) 2001
Mr. Crain is the President and Editorial Director of Crain
Communications, a diversified publishing company with its principal offices in
Chicago, IL.
Mr. Moloney is the Chief Operating Officer, North America, of Vertis,
Inc., Baltimore, MD.
Directors Continuing In Office
Name Age Current Term Director Since
- --------------------------------------------------------------------------------
Mary E. Junck ...................... 54 2 years (2004) 1999
Andrew E. Newman (1) ............... 57 2 years (2004) 1991
Gordon D. Prichett (2) ............. 60 2 years (2004) 1998
William E. Mayer (2) (3) ........... 61 1 year (2003) 1998
Gregory P. Schermer ................ 47 1 year (2003) 1999
Mark Vittert (1) (3) ............... 53 1 year (2003) 1986
- --------------------------------------------------------------------------------
(1) Member of Executive Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
Ms. Junck was elected President and Chief Executive Officer of the
Company in January 2001. She became Executive Vice President and Chief Operating
Officer of the Company in May 1999 and President in January 2000. From May 1996
to April 1999 she was Executive Vice President of The Times Mirror Company and
President of Eastern Newspapers. She was named Publisher and Chief Executive
Officer of The Baltimore Sun in 1993.
Mr. Newman is Chairman and Chief Executive Officer of Race Rock
International, St. Louis, MO. He is also a director of Sigma-Aldrich
Corporation.
Mr. Prichett is a partner in Cairnwood Cooperative, Boston, MA, a
private investment group. He is also Professor of Mathematics, Statistics and
Information Systems at Babson College, Babson Park, MA.
Mr. Mayer is founding partner of Park Avenue Equity Partners, L.P., New
York, NY, a private equity firm. He is also a director of Systech Retail
Systems, and a trustee of the Liberty Mutual Funds.
Mr. Schermer was elected Vice President-Interactive Media in November
1997. From 1989 through November 1997 he was, and continues to serve as,
Corporate Counsel of the Company.
Mr. Vittert is a private investor.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors met five times in fiscal 2001.
The Company's Audit Committee met seven times in fiscal 2001. Its
functions include review of the scope, timing and other considerations relative
to the independent auditors' annual audit of the consolidated financial
statements, the adequacy of internal control and the internal audit function,
and evaluation of the performance of external and internal auditors and the
Company's accounting and financial functions. In addition, the Committee reviews
professional services provided by the Company's independent auditors, in
general, prior to rendering of such services, and the possible effect of any
nonaudit-related services upon the independence of the Company's independent
auditors.
The Company's Executive Compensation Committee met three times in
fiscal 2001. Its functions are to administer the Company's Retirement Account
and Supplementary Benefit Plans and the 1990 Long Term Incentive Plan; to
establish salary ranges and salaries, bonus formulae and bonuses, and
participation in other benefit plans or programs, for elected officers; to
review employment terminations involving payment to any individual in excess of
$150,000; to approve employment contracts for executives extending beyond one
year; and to approve the position description performance standards and key
result areas for bonus criteria for the Chief Executive Officer of the Company
and to measure his or her related performance. In addition, the Committee
recommends to the Board of Directors significant employee benefit programs and
bonus or other benefit plans affecting individuals on the executive payroll
other than elected officers.
The Company's Nominating Committee met three times in fiscal year 2001.
Its functions are to consider and recommend to the Board all nominees for
possible election and re-election to the Board, and to consider all matters
relating to the size, composition and governance of the Board and the general
subject matter, size and composition of Board committees. The Nominating
Committee will consider nominees recommended by the stockholders.
Recommendations should be sent to Mark Vittert, Chairman, Nominating Committee,
in care of the Company, at the address shown on the cover of this Proxy
Statement.
No incumbent director attended fewer than 75% of the aggregate of (1)
the total number of meetings of the Board of Directors and (2) the total number
of meetings held by all committees of the Board on which he or she served during
2001.
COMPENSATION OF DIRECTORS
No Company employee receives any remuneration for acting as a director.
In fiscal 2001 Messrs. Crain, Guerin, Mayer, Newman, Prichett, Rickman and
Vittert and Mrs. Sewell were paid a $24,400 annual retainer, $1,000 for each
Board meeting attended, $700 for each Committee meeting attended and $350 for
each special telephone meeting. Committee chairs were also paid $3,000 extra as
an annual retainer for acting as such. In February 2001, Mr. Gottlieb was paid a
$50,000 retainer for serving as Chairman, and his medical and dental insurance
continues in effect. Directors engaged to provide consultative services are
normally compensated at the rate of $1,500 per diem. No non-employee director
was paid additional compensation for consultative services in fiscal 2001.
In 1996 the stockholders of the Company adopted the Stock Plan for
Non-Employee Directors. Under the plan, non-employee directors receive an annual
grant of 500 shares of Common Stock, and may elect to receive all or 50% of the
cash retainer and meeting fees described above in Common Stock of the Company.
The Board of Directors has authorized non-employee directors, prior to
the beginning of any Company fiscal year, to elect to defer receipt of all or
any part of the compensation a director might earn during such year. Amounts so
deferred will be paid to the director upon his or her ceasing to be a director
or upon attaining any specified age between 60 and 70, together with interest
thereon at the average rate of interest earned by the Company on its invested
funds during each year. Alternatively, directors may elect to have deferred
compensation credited to a "rabbi trust" established by the Company with an
independent trustee, which administers the investment of amounts so credited for
the benefit and at the direction of the trust beneficiaries until their accounts
are distributed under the deferred compensation plan.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information as of November 30, 2001 as
to each person known by the Company to own beneficially more than five (5%)
percent of the Common Stock or Class B Common Stock of the Company.
Percent Class B Percent
Beneficial Owners Common Stock of Class Common Stock of Class
- -----------------------------------------------------------------------------------------------------
Ariel Capital Management, Inc. (1) 8,541,825 25.2% --- ---%
200 E. Randolph Street
Suite 2900
Chicago, IL 60601
Harris Associates, L.P. (2) 1,883,035 5.6 --- ---
Two North LaSalle Street
Suite 500
Chicago, IL 60602
Lloyd G. Schermer (3) --- --- 1,237,586 12.1
c/o Lee Enterprises, Incorporated
215 North Main Street
Davenport, IA 52801-1924
Betty A. Schermer (4) --- --- 1,116,354 10.9
c/o Lee Enterprises, Incorporated
215 North Main Street
Davenport, IA 52801-1924
Gregory P. Schermer (5) 146,730 * 528,770 5.2
c/o Lee Enterprises, Incorporated
215 North Main Street
Davenport, IA 52801-1924
Grant Schermer 99 * 513,146 5.0
c/o Lee Enterprises, Incorporated
215 North Main Street
Davenport, IA 52801-1924
- -----------------------------------------------------------------------------------------------------
* Less than one percent of the class.
(1) The information is based on a report on Schedule 13G, dated August 31,
2001, filed by Ariel Capital Management, Inc. ("Ariel") with the
Securities and Exchange Commission. Ariel reported sole voting power
with respect to 7,767,595 of the reported shares and sole dispositive
power with respect to 8,532,705 shares. According to New York Stock
Exchange ("NYSE") records, Ariel owned 8,637,515 shares as of November
30, 2001.
(2) The information is based on a report on Schedule 13G, dated January 30,
3001, filed by Harris Associates, L.P. ("Harris") with the Securities
and Exchange Commission. Harris reported sole voting and sole
dispositive power with respect to all of the reported shares. According
to NYSE records, Harris owned 1,036,805 shares as of November 30, 2001.
(3) Includes (i) 458,028 shares of Class B Common Stock owned by a trust as
to which Lloyd G. Schermer retains sole voting and investment powers;
(ii) 348,838 shares of Class B Common Stock held by a charitable trust
as to which Mr. Schermer has sole voting and shared investment power;
and (iii) 5,520 shares of Common Stock and 110,020 shares of Class B
Common Stock held by a trust and 320,700 shares of Class B Common Stock
held by a charitable foundation as to which Mr. Schermer shares voting
and investment powers. Mr. Schermer disclaims beneficial ownership of
779,558 shares of Class B Common Stock listed above, and of the Common
Stock and Class B Common Stock beneficially owned by Betty A. Schermer
listed above and described in footnote (4) below.
(4) Includes (i) 795,654 shares of Class B Common Stock owned by trusts
under which Betty A. Schermer has sole voting and investment powers;
and (ii) 320,700 shares of Class B Common Stock held by a charitable
foundation as to which Mrs. Schermer has shared voting and investment
power, but disclaims all beneficial ownership. Mrs. Schermer also
disclaims beneficial ownership of all Common Stock and Class B Common
Stock beneficially owned by Lloyd G. Schermer listed and described in
footnote (3) above.
(5) Includes 6,000 shares of Class B Common Stock owned by his spouse,
2,000 shares of Common Stock and 6,000 shares of Class B Common Stock
held by a trust for the benefit of his minor son, and 4,000 shares of
Class B Common Stock held by a trust for the benefit of a minor
daughter, as to which Mr. Schermer disclaims all beneficial ownership
and exercises no voting or investment power.
The following table sets forth information as to the Common Stock and
Class B Common Stock of the Company beneficially owned as of November 30, 2001
by each director and nominee, each of the named executive officers listed in the
Summary Compensation Table below, and by all directors and executive officers as
a group:
Name of Percent Class B Percent
Beneficial Owner Common Stock of Class Common Stock of Class
- --------------------------------------------------------------------------------
Rance E. Crain 11,216 * % --- --- %
Richard D. Gottlieb (1)(2) 222,521 * 157,799 1.5
J. P. Guerin (1) 6,000 * 99,614 *
James W. Hopson (2) 19,100 * --- ---
Mary E. Junck (2) 56,230 * --- ---
William E. Mayer 4,336 * --- ---
Herbert W. Moloney, III 500 * --- ---
Andrew E. Newman 4,500 * --- ---
Michael E. Phelps (2) 10,176 * --- ---
Gordon D. Prichett 3,600 * --- ---
Gregory P. Schermer (1) (2) 146,730 * 528,770 5.2
Phyllis Sewell 3,700 * 2,450 *
John VanStrydonck (2) 14,927 * --- ---
Greg R. Veon (2) 84,628 * 5,804 *
Mark Vittert 5,000 * --- ---
All executive officers and
directors as a group
(17 persons) 624,670 1.8 794,437 7.8
- --------------------------------------------------------------------------------
* Less than one percent of the class.
(1) The following directors and named executive officers disclaim beneficial
ownership of the following shares, included above, not owned personally by
them or held for their benefit: Mr. Gottlieb - 2,451 shares of Common Stock
and 51,939 shares of Class B Common Stock; Mr. Guerin - 3,000 shares of
Common Stock and 2,850 shares of Class B Common Stock; and Mr. Schermer -
4,760 shares of Common Stock and 71,010 shares of Class B Common Stock.
(2) This table includes the following shares of Common Stock subject to
acquisition within 60 days by the exercise of outstanding stock options:
Mr. Gottlieb - 132,003; Mr. Hopson - 13,500; Ms. Junck - 24,000; Mr. Phelps
- 5,250; Mr. Schermer - 17,722; Mr. VanStrydonck - 10,400; and Mr. Veon -
50,140.
EXECUTIVE COMPENSATION
The following table and discussion summarize the compensation which the
Company paid for services rendered in all capacities for the fiscal year ended
September 30, 2001 to the chief executive officers of the Company and to each of
the four other most highly compensated executive officers.
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
--------------------------------------------- --------------------------
Restricted Stock
Name and Principal Other Stock Options All
Position Year Salary Bonus Annual Awards (#) Other
- --------------------------------------------------------------------------------------------------------------------
(7) (9) (7)(10) (7) (12)
Richard D. Gottlieb 2001 $205,000 (6) $950,000 (6) --- $ --- 43,878 (11) $221,600 (6)
Chairman and Chief 2000 615,000 184,000 --- --- 30,000 130,700
Executive Officer (1) 1999 581,400 174,400 --- 116,000 25,000 123,600
Mary E. Junck 2001 575,000 300,000 --- 709,200 75,000 115,900
President and Chief 2000 460,000 138,100 --- 129,700 30,000 42,800
Executive Officer (1) 1999 153,000 125,000 (8) --- 144,700 (8) 25,000 (8) ---
James W. Hopson 2001 325,000 58,800 --- 85,100 20,000 4,100
Vice President - 2000 50,800 --- --- 51,900 (8) 45,000 (8) ---
Publishing (2) 1999 --- --- --- --- --- ---
Greg R. Veon 2001 258,300 47,500 --- 85,100 24,186 (11) 45,700
Vice President - 2000 238,600 53,300 --- 51,900 20,000 46,700
Publishing (3) 1999 197,800 63,300 --- 29,900 15,000 37,400
Michael E. Phelps 2001 210,000 68,300 --- 56,700 15,000 16,200
Vice President - 2000 122,100 45,000 --- 38,900 (8) 17,500 (8) ---
Sales & Marketing (4) 1999 --- --- --- --- --- ---
John VanStrydonck 2001 200,000 31,000 --- 56,700 15,000 51,100
Vice President - 2000 167,800 129,300 --- 51,900 20,000 38,900
Publishing (5) 1999 149,000 71,600 --- 22,500 4,000 31,200
- ---------------------------------------------------------------------------------------------------------------------
(1) Mr. Gottlieb served as Chief Executive Officer until his retirement in
January 2001, at which time Ms. Junck was elected to the position.
(2) Mr. Hopson was elected Vice President - Publishing and Publisher of the
Wisconsin State Journal in July 2000.
(3) Mr. Veon was elected Vice President - Publishing in November 1999; from
November 1995 through November 1999 he was Vice President - Marketing.
(4) Mr. Phelps was elected Vice President - Sales & Marketing in February 2000.
(5) Mr. VanStrydonck was elected Vice President - Publishing in June 2000. From
September 1994 to June 2000 he was Publisher of the Rapid City Journal and
was Chairman and Chief Operating Officer of NAPP Systems from September
1994 until its sale by Lee in January 1997.
(6) Excludes compensation related to service as a member of the Board of
Directors. The bonus for 2001 is related to the successful divestiture of
the broadcast business.
(7) The Executive Compensation Committee of the Company meets following the
conclusion of the Company's fiscal year to determine, among other things,
the annual bonus and long term compensation grants to be awarded, if any,
for the fiscal year just concluded. The Summary Compensation Table includes
the value of shares of restricted Common Stock and the number of stock
options granted by the Executive Compensation Committee under the Company's
1990 Long Term Incentive Plan in each of the years indicated for the
corresponding fiscal year.
(8) Includes compensation received by the named executive officer in
conjunction with his or her employment by the Company.
(9) Less than the lesser of $50,000 or 10% of compensation.
(10) Represents shares of restricted Common Stock in the following amounts
granted to the named executive officers for fiscal 2001, 2000, and 1999,
respectively.
2001 2000 1999
---------------------------------------------------------------------------
Richard D. Gottlieb ............... -- -- 4,000
Mary E. Junck ..................... 20,000 5,000 5,000
James W. Hopson ................... 2,400 3,000 --
Greg R. Veon ...................... 2,400 2,000 1,000
Michael E. Phelps ................. 1,600 2,500 --
John VanStrydonck ................. 1,600 2,000 750
(11) Includes replacement, or "reload," options awarded at fair market value at
date of exercise of non-qualified stock options as follows: Mr. Gottlieb -
43,878, and Mr. Veon - 4,186. Such options have a term equal to the
remaining term of the options exercised or, with respect to Mr. Gottlieb,
the earlier of the remaining term of the options exercised or January 31,
2006. Such options are exercisable after one year or, with respect to Mr.
Gottlieb, immediately.
(12) Represents contributions by the Company on behalf of the named individuals
to the Company's Retirement Account Plan and Supplemental Retirement
Account.
Option Grants For Year Ended September 30, 2001
% of Total
Options Granted
Options to Employees in Exercise Price Expiration Grant Date
Name Granted Fiscal Year Per Share Date Present Value
- --------------------------------------------------------------------------------------------------------
(1) (3)
Richard D. Gottlieb ... 43,878 (2) 12.7% $28.25 - 32.10 11/17/2002- $259,300
1/31/2006
Mary E. Junck ......... 75,000 21.7 35.46 11/14/2011 735,800
James W. Hopson ....... 20,000 5.8 35.46 11/14/2011 196,200
Greg R. Veon .......... 20,000 5.8 35.46 11/14/2011 196,200
4,186 (2) 1.2 33.68 11/07/2005 26,100
Michael E. Phelps ..... 15,000 4.3 35.46 11/14/2011 147,200
John VanStrydonck ..... 15,000 4.3 35.46 11/14/2011 147,200
- ---------------------------------------------------------------------------------------------------------
(1) The options granted to the named individuals (other than replacement
options) were determined by the Executive Compensation Committee following
review of each individual's performance in fiscal year 2001, and become
exercisable in installments of 30% of the original grant on each of the
first and second anniversaries of the grant date and 40% on the third
anniversary. All options are for Common Stock and have an exercise price
equal to the closing market price of the stock on the grant date. The
lesser of 25% or the maximum number of shares permitted by law are
designated as incentive stock options, and the balance are non-qualified
options. All options were granted under the Company's 1990 Long Term
Incentive Plan, the provisions of which, among other things, allow an
optionee exercising an option to satisfy the withholding tax obligations by
electing to have the Company withhold shares of stock otherwise issuable
under the option with a fair market value equal to such obligations. The
Plan also permits an optionee exercising an option to satisfy the exercise
price by delivering previously awarded restricted stock or previously owned
Common Stock. The limitations accompanying the restricted stock remain in
effect and apply to the corresponding number of shares issued upon the
stock option exercise until they lapse according to their original terms.
(2) Replacement, or "reload," options awarded at fair market value at date of
exercise of non-qualified stock options. Such options have a term equal to
the remaining term of the options exercised or, with respect to Mr.
Gottlieb, the earlier of the remaining term of the options exercised or
January 31, 2006. Such options are exercisable after one year or, with
respect to Mr. Gottlieb, immediately.
(3) The "grant date present value" is a hypothetical value determined using
certain assumptions specified under the Black-Scholes Option Pricing Model.
The range of assumptions used in calculating the values is as follows:
Factor Grant of November 14, 2001 Reload Options
---------------------------------------------------------------------------
Dividend yield ............ 1.9% 2.0 - 2.4%
Volatility ................ 20.0% 20.0 - 21.0%
Risk-free interest rate ... 4.7% 4.5 - 5.2%
Expected life ............. 10.0 years 2.0 - 4.9 years
The Company's stock options are not transferable, are subject to a risk
of forfeiture, and the actual value of the stock options that an executive
officer may realize, if any, will depend on the excess of the market price on
the date of exercise over the exercise price.
Aggregate Option Exercises in Year Ended September 30, 2001 and Fiscal Year End
Option Values
Value of Unexercised
Number of Unexercised In-the-Money Options
Number of Options at September 30, at September 30, 2001
Shares Acquired Value 2001 Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Richard D. Gottlieb ........ 284,975 $4,213,000 132,003 $ 481,000
-- --
Mary E. Junck .............. -- -- 15,000 41,000
40,000 199,300
James W. Hopson ............ -- -- 7,500 28,900
37,500 182,100
Greg R. Veon ............... 13,000 242,000 36,840 341,900
37,486 145,400
Michael E. Phelps .......... -- -- 2,250 20,400
15,250 104,800
John VanStrydonck .......... 5,860 64,900 2,400 7,500
23,600 123,100
- -------------------------------------------------------------------------------------------------------------
(1) All options are for Common Stock and were granted under the Company's 1990
Long Term Incentive Plan.
(2) Market value of underlying securities at exercise date minus the exercise
price.
(3) Options granted under the Company's 1990 Long Term Incentive Plan become
exercisable in three installments over a period of three years from the
date of grant. The number of unexercisable options shown excludes those
granted by the Executive Compensation Committee in November 2001 for the
fiscal year ended September 30, 2001.
(4) Market value of underlying securities at September 30, 2001 ($31.67), minus
the exercise price.
Benefit Plans and Retirement Programs
Under the Company's Retirement Account and Supplementary Benefit Plans,
the Company matches, upon eligibility, employee contributions up to 5.0% of
employee compensation and, in addition, until September 30, 2001, contributed
6.2% of a participant's total compensation plus an additional 5.7% of such
compensation in excess of $80,400. These retirement plans are defined
contribution plans. The Company and employee contributions are invested and the
total amount is paid following his or her retirement. The amounts credited in
fiscal 2001 under the Retirement Account and Supplementary Benefit Plans to the
accounts of the person listed in the Summary Compensation Table under the
caption "All Other Compensation."
Agreements With Named Executive Officers
The Company was obliged under a written agreement to pay to Mr.
Gottlieb a multiple of three times his base salary in the event of termination
of his employment without cause. This agreement expired in January 2001, upon
his retirement as Chief Executive Officer. The Company determined in 1991 not to
enter into such agreements in the future with its executive officers.
Change-of-Control Employment Agreements
In 1998 the Board of Directors approved employment agreements between
the Company and its executive officers, including each of the named executive
officers, which become effective upon a change of control or in the event of a
termination of employment in anticipation of a change of control. The agreements
extend for three years, but renew annually for a new three-year period unless
the Company gives prior notice of termination. The agreements provide that each
such officer is to remain an employee for a three-year period following a change
of control of the Company (the "Employment Period"). During the Employment
Period, the officer is entitled to (i) an annual base salary, payable monthly in
an amount at least equal to his or her highest monthly base salary during the
year prior to the change of control, (ii) an annual bonus in an amount at least
equal to his or her highest annual bonus in the three years prior to the change
of control, and (iii) continued participation in the Company's incentive,
savings, retirement and welfare benefit plans. The officer also is entitled to
payment of expenses and fringe benefits to the extent paid or provided to (a)
such officer prior to the change of control or (b) other peer executives of the
Company.
If during the Employment Period, the officer's employment is terminated
other than for "Cause" or disability or the officer terminates his or her
employment for "Good Reason", including a detrimental change in responsibilities
or a reduction in salary or benefits, the officer will be entitled to the
following benefits: (i) all accrued and unpaid compensation; (ii) a severance
payment equal to three times the sum of such officer's (a) annual base salary,
and (b) highest recent annual bonus; (iii) payment equal to the retirement
contribution that the officer would have been eligible to receive from the
Company under the terms of the Company's Retirement Account Plan and
Supplemental Retirement Account (or successor plan or program then in effect),
determined as if the officer were fully vested thereunder and had continued
(after the date of termination) to be employed for an additional three years at
the officer's highest recent annual compensation for purposes of determining the
basic contributions and supplemental contributions; (iv) the amount of any
forfeited benefits under the Company's Savings Plan; and (v) any legal fees and
expenses incurred by the officer in asserting legal rights in connection with
the agreement. The officer shall also be entitled to continued welfare benefits
for three years and outplacement services. Subject to certain limits on
payments, the agreement also requires tax "gross-up" payments to the officer to
mitigate any excise tax imposed on the officer under Sections 280G and 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), and any penalties
and interest in connection with a change of control. These payments would be in
addition to awards of restricted stock, stock options and stock appreciation
rights or amounts payable in lieu thereof under the Company's 1990 Long Term
Incentive Plan which, in the event of a change of control and subject to certain
limitations contained in the agreements, provides for early exercise and vesting
and issuance or payment of such awards. The officer is entitled to receive such
amounts in a lump-sum payment within 30 days of termination.
A change of control includes certain mergers and acquisitions,
liquidation or dissolution of the Company, changes in the membership of the
Company's Board of Directors and acquisition of securities of the Company.
Performance Presentation
The following graph compares the quarterly percentage change in the
cumulative total shareholder return of the Company, the Standard & Poor's (S &
P) 500 Stock Index, and the S & P Publishing/Newspapers Index, in each case for
the five years ending September 30, 2001 (with September 30, 1996 as the
measurement point). Total shareholder return is measured by dividing (a) the sum
of (i) the cumulative amount of dividends declared for the measurement period,
assuming dividend reinvestment and (ii) the difference between the issuer's
share price at the end and the beginning of the measurement period, by (b) the
share price at the beginning of the measurement period.
The data points used for the omitted graph were as follows:
September 30 1996 1997 1998 1999 2000 2001
- ---------------------------------------------------------------------------
Lee ................ $100.00 $126.60 $117.93 $127.01 $137.15 $153.74
S&P 500 Stock Index 100.00 140.45 153.15 195.19 221.12 162.26
S&P Media Index .... 100.00 151.45 147.75 210.93 199.90 219.17
The S & P 500 Stock Index includes 500 U.S. companies in the
industrial, transportation, utilities and financial sectors and is weighted by
market capitalization. The S & P Publishing/Newspapers Index, which is also
weighted by market capitalization, includes the following companies considered
to be peers of the Company: Gannett Co., Inc., Knight-Ridder, Inc., The New York
Times Company, The Times Mirror Company (until June 12, 2000), Dow Jones &
Company, Inc. and The Tribune Company.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Committee
The Executive Compensation Committee of the Board of Directors (the
"Committee") is composed of four independent outside directors. No executive
officer of the Company is a member of the board of directors of any company with
which a member of the Committee is affiliated. The Board of Directors has
delegated to the Committee the authority to review, consider and determine the
compensation of the Company's executive officers and other key employees and, in
accordance with Rule 16b-3 of the Exchange Act, make the final determination
regarding awards of stock options, restricted stock, and other stock-based
awards to such persons.
Compensation Policies
The Committee operates on the principle that the compensation of the
Company's executive management, including its Chief Executive Officer and the
other executive officers named in the Summary Compensation Table, should be
competitive with compensation of executive management at comparable companies.
The Committee also follows a policy of basing a significant portion of the cash
compensation of senior executive officers on the operating performance of the
Company, and of other members of the executive management team on the
performance of the enterprises, units or functions over which they exercise
significant management responsibility. The Committee's policies are designed to
assist the Company in attracting and retaining qualified executive management by
providing competitive levels of compensation that integrate the Company's annual
and long term performance goals, reward strong corporate performance, and
recognize individual initiative and achievement. The Committee also believes
that stock ownership by management and stock-based performance compensation
arrangements are beneficial in the linking of management's and stockholders'
interest in the enhancement of shareholder value.
The Company's executive compensation program is comprised of three
elements: (1) base salary; (2) annual incentive bonus; and (3) long-term
incentive compensation.
Base Salary
Salary levels for executive management are set so as to reflect the
duties and level of responsibilities inherent in the position, and to reflect
competitive conditions in the lines of business in which the Company is engaged
in the geographic areas where services are being performed. Comparative salaries
paid by other companies in the industries and locations where the Company does
business are considered in establishing the salary for a given position. The
Company participates annually in the Towers Perrin Media Industry Compensation
Survey (the "Towers Survey"), which is widely used in its industry and gives
relevant compensation information on executive positions. The Company strives to
place fully competent and highly performing executives at the median level of
compensation, as reported annually in the Towers Survey.
The Towers Survey provides annual compensation analyses for executives
in the media industry based on revenue, industry segments including publishing,
and market type and size. The statistical information, including revenue and
compensation levels, provided by survey participants is utilized by the Towers
Survey to develop statistical equations based on revenue, industry segments and
markets. These equations, along with other data, are used by the Company to
determine the median and other levels of compensation of the executive
management of media companies with profiles comparable to that of the Company.
Base salaries for executives named in the Summary Compensation Table are
reviewed annually by the Committee taking into account the competitive level of
pay as reflected in the Towers Survey. In setting base salaries, the Committee
also considers a number of factors relating to the particular executive,
including individual performance, level of experience, ability and knowledge of
the job. These factors are considered subjectively in the aggregate and none of
the factors is accorded a specific weight. The Committee believes the base
salary levels are reasonable and necessary to retain these key employees. The
Company has, with the Committee's consent, frozen executive salary levels due to
general economic conditions.
Annual Incentive Bonus Program
The purpose of the annual incentive bonus program is to motivate and
reward executive management so that they consistently achieve specific financial
targets and are compensated for the accomplishment of certain non-financial
objectives. These targets and objectives are reviewed and approved by the
Committee annually in conjunction with its review of the Company's strategic and
operating plans. A target bonus level, stated as a percent of annual base
salary, is established for each member of the executive management team other
than executive officers, by the executive officer exercising responsibility over
an enterprise unit or function. For executive officers other than the Chief
Executive Officer, the bonus level and achievement targets are determined by the
Chief Executive Officer and approved by the Committee. Similarly, the Committee
determines the annual bonus opportunity and performance objectives of the Chief
Executive Officer. While the annual incentive bonus awards for executives other
than the Chief Executive Officer are generally approved upon the recommendation
of the Chief Executive Officer, the Committee retains the right to adjust the
recommended bonus awards to reflect its evaluation of the Company's overall
performance.
Long Term Incentives
Under the Company's 1990 Long Term Incentive Plan, the Committee is
authorized, in its discretion, to grant stock options and restricted stock
awards in such proportions and upon such terms and conditions as the Committee
may determine. The Committee meets following the end of each year to evaluate
the performance of the Company for the preceding fiscal year and determine long
term incentive awards of executive management of the Company for the fiscal year
just ended. Under the Plan, grants to executives are based on criteria
established by the Committee, including responsibility level, base salary,
current market practice and the market price of the Company's Common Stock at
the time of grant. The number of stock options and/or restricted shares then
determined is reviewed by the Committee and may be increased or decreased to
reflect the criteria noted above, the individual executive's role in
accomplishment of the Company's operating objectives, and that individual's
potential for long term growth and contribution to the Company's strategic
objectives. Grant guidelines for stock options and restricted stock are
established for all participants (including the Chief Executive Officer) with
the objective of providing a target total compensation opportunity, including
base salary and the target annual incentive bonus, equal to the median of the
peer group. Depending on stock price performance and Company performance, actual
total compensation for any given year could be at, above or below the median of
the peer group. The number of options or restricted shares previously granted to
or held by an executive is not a factor in determining individual grants.
The number of stock options granted to each executive officer in 2001
was determined by dividing a specified dollar amount of the target award for the
grant by a hypothetical fair market value of the stock option as of the grant
date, based upon the Black-Scholes Option Pricing Model. All stock options
granted have an exercise price equal to the fair market value of the Common
Stock at time of grant and are exercisable within a 10-year period. In order to
assure the retention of high level executives and to tie the compensation of
those executives to the creation of long term value for stockholders, the
Committee has provided that stock options generally vest in specified portions
over a three year period.
The awards of restricted stock to executive officers and other key
employees in 2001 represent shares of Common Stock which the recipient cannot
sell or otherwise transfer until the applicable restriction period lapses. The
number of shares of restricted stock awarded was determined by dividing a
specified dollar amount of the target award by the fair market value of the
Company's Common Stock on the date the awards are approved. Restricted stock
awards are also intended to increase the ownership of executives in the Company,
through which the value of long term stock ownership and growth can be enhanced.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to certain
executive officers in any taxable year beginning on or after January 1, 1994.
Performance-based compensation, commissions and payments in respect of binding
obligations entered into prior to February 17, 1993 are not subject to the
deduction limit if certain requirements are met. The Company has structured the
compensation of its executive officers in a manner that results in no disallowed
deductions under section 162(m).
Compensation of Chief Executive Officer
The Committee determined the 2001 base salary for the Company's Chief
Executive Officer, Richard D. Gottlieb, and, subsequently, Mary E. Junck, in a
manner consistent with the base salary guidelines applied to executive officers
of the Company as described above. The annual bonuses paid to Mr. Gottlieb and
Ms. Junck for 2001 were based upon an evaluation of the performance of the
Company in relation to past years and the performance of comparable media
companies, as well as the accomplishment of certain non-financial performance
objectives and the successful initiation of several long-term and strategic
initiatives which the Committee believes will be of significant benefit to the
Company in the future. Mr. Gottlieb's 2001 bonus also took into consideration
the successful divestiture of the Company's broadcast business.
The Committee made a long-term compensation award of stock options and
restricted stock to Ms. Junck for 2001 by applying the same criteria described
for the determination of such awards to other executive officers of the Company.
The Committee did not consider past stock option grants to Ms. Junck in
determining the amount of her 2001 grant. The Committee did consider the 2001
performance of the Company, as more particularly described above, in the final
determination of such grants.
Executive Compensation Committee Participation
The current members of the Executive Compensation Committee are Phyllis
Sewell, Chairman, Rance E. Crain, Andrew E. Newman and Mark Vittert.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
OF DIRECTORS REGARDING ANNUAL FINANCIAL STATEMENTS
The Audit Committee of the Board of Directors is comprised of three
directors who are not officers of the Company. All members are independent under
rules of the New York Stock Exchange. The Board of Directors has a written
charter for the Audit Committee.
The Committee held seven meetings during fiscal 2001. The meetings were
designed to facilitate and encourage private communication between the
Committee, the Company's internal auditors and the Company's independent public
accountants, McGladrey & Pullen, LLP ("McGladrey").
During these meetings, the Committee reviewed and discussed the audited
financial statements with management and McGladrey. The Audit Committee believes
that management maintains an effective system of internal controls that results
in fairly presented financial statements. Based on these discussions, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K.
The discussions with McGladrey also included the matters required by
Statement on Auditing Standards No. 61. The Audit Committee received from
McGladrey written disclosures and the letter regarding its independence as
required by Independence Standards Board Standard No. 1. This information was
discussed with McGladrey.
Audit Committee Participation
The current members of the Audit Committee are J. P. Guerin, Chairman,
William E. Mayer and Gordon D. Prichett.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of McGladrey & Pullen, LLP, Certified Public Accountants, was
designated by the Board of Directors of the Company to audit the consolidated
financial statements of the Company for the fiscal year ended September 30,
2001. Representatives of McGladrey will be present at the 2002 Annual Meeting
and will be afforded the opportunity to make a statement, if they desire to do
so, and will be available to respond to appropriate questions.
For the year ended September 30, 2001, McGladrey and RSM McGladrey,
Inc. (an affiliate of McGladrey) performed the following professional services
and received, or will receive, fees in the amounts indicated:
Audit of 2001 consolidated financial statements $178,000
Financial information systems design and implementation 20,000
Tax and all other services 340,000
The Board of Directors will choose independent public accountants for
purposes of auditing the consolidated financial statements of the Company for
the year ending September 30, 2002, after the Annual Meeting.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Proposals of stockholders with regard to nominees for the Board of
Directors or other matters to be presented at the 2003 Annual Meeting of the
Company must be received by the Company to be considered for inclusion in its
proxy statement and form of proxy relating to that meeting by September 30,
2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10
percent of the Company's Common Stock or Class B Common Stock to file initial
reports of ownership and reports of changes in that ownership with the
Securities and Exchange Commission and the New York Stock Exchange. Specific due
dates for these reports have been established, and the Company is required to
disclose in its proxy statement any failure to file by these dates during the
Company's 2001 fiscal year.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all filing requirements applicable to its executive
officers and directors were satisfied. With respect to the Company's two known
holders of more than 10 percent of the Company's Class B Common Stock, Lloyd G.
Schermer filed four late reports involving twelve separate transactions in the
Company's Common Stock by a trust of which he is a co-trustee as to which he
disclaims beneficial interest and Betty A. Schermer filed one late report of her
holdings of the Company's Class B Common Stock.
OTHER MATTERS
The management of the Company knows of no matters to be presented at
the meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters properly come before the meeting,
your proxy, if signed and returned, will give discretionary authority to the
persons designated in it to vote in accordance with their best judgment.
The cost of the solicitation of proxies will be borne by the Company.
In addition to solicitation by mail, some of the officers and regular employees
of the Company may, without extra remuneration, solicit proxies personally or by
telephone, electronic transmission, facsimile or by telegram. The Company may
also request brokerage houses, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of stock held of record and will
reimburse such persons for their expenses. The Company has retained Morrow &
Co., Inc. to aid in the solicitation of proxies, for which the Company will pay
an amount that it has estimated will not exceed $10,000 plus expenses.
/s/ Mary E. Junck
-------------------------------------
MARY E. JUNCK
President and Chief Executive Officer